Balderton

Where smart tech investment is going this year

JAN 06, 2016

This post originally appeared on TechCityNews on 6th January

There are two broad areas I think will continue to be VCs’ sweethearts in 2016: healthcare and cybersecurity.

Healthcare

As a sector, healthcare is still relatively un-digitised compared to other industries and compared to other parts of our lives.

Because of the heavy red tape, complexities in the very large health-care systems around the world, and restrictions around use of data for compliance and privacy reasons, digital has only begun to chip away at healthcare and there is a lot more to be done.

In the past, investing in healthcare was mainly left to the VC funds that focused specifically on life sciences, but in 2016 we will continue to see the increase in attention from technology-focused VCs in this sector.

The main reason for this is we’re now seeing a wave of start-ups tackling issues in healthcare using data and software, which we understand well, rather than patented compounds and devices, where life science VCs tend to be better placed.

We expect to see this in every aspect of healthcare. Companies like Figure 1 and Patients Know Best are improving workflows and information sharing; Omada Health are pioneering digital therapies; and Synthace, the self-dubbed ‘operating system for biology’, is making waves in software for bioengineering,

Cybersecurity 

In security, a higher number of incidents and high-profile breaches in 2014 and 2015 has led to increased attention in the sector generally.

Demand for security products has grown, as is only set to grow further; and responsibility for security is now held in more parts of any organisation.

In other words, people other than the security analyst and the chief information security officer, who have traditionally been the users of security tools, are being made responsible for making sure private information and intellectual property is secure.

The responsibility lies with both the C-suite, as share price is directly impacted by a breach, as well as with the developer, who has to ship safe code and include security features on products as they are built.

Because of this, I expect to see more VC money moving into security tools that target developers, like Detectify and Castle.io, as well as threat intelligence tools that can be used on a higher level in the organisation, like Panaseer.

Apart from these broader trends, there are also a few new and interesting categories I think will gain attention from VCs in 2016, that have come about from trends we saw in 2014 and 2015.

Supporting the on-demand economy

2014 and 2015 saw a boom in VC investments into on-demand companies, in everything from taxis to food delivery to the ‘anything-within-one-hour’ concierge service.

In 2016, I expect to see a boom in products supporting the ‘behind the scenes’, especially when it comes to managing the large pool of workers that are on stand-by to serve the users of on-demand services.

On the B2B side, I expect to see more tools like OnFleet, that help on-demand services either manage or recruit a fleet of couriers, drivers, chefs – you name it.

On the B2C side, I wouldn’t be surprised if we see more companies getting funded to support these types of workers by, for example, helping them evaluate how to optimise their time between driving for Lyft or Uber, delivering meals or packages, even doing more obscure tasks like mapping, or other services that help them plan and save for a lifetime of work that is very different from a traditional career – less regularity and stability, more subject to market forces.

These are, of course, not restricted to the new type of on-demand worker, as new services could also support more traditional forms of ‘gig’ and hourly workers – a large number of workers in the US already work by the hour and often have multiple jobs.

Messenger app stores

2014 and 2015 also saw the rise of the messenger platforms, both in enterprise and in our everyday lives, and I expect 2016 to see the rise of new app stores within them.

With this trend, I also expect to see more funding for companies that are building products within the messenger, as the messenger becomes a new distribution channel.

Slack has quickly become the messenger platform of choice in the workplace and Facebook has deliberately built Facebook Messenger to be closer to an operating system and an app store than a pure messenger, like Facebook-owned Whatsapp.

What is incredible is that by building apps on top of Facebook Messenger or WeChat, for example, developers can reach audiences of 700 million and 650 million monthly active users, respectively.

This means there is a lot of opportunities to grow large businesses by developing apps tailored to what users need in a very specific messenger setting.

The amount of activity we see here will depend a lot on how open the platforms become – Slack and platforms like Telegram are very open to third-party apps already, whereas this isn’t really the case for Facebook Messenger at this stage.

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